Insurance Technology

More Bots Chatting Up the Insurance Industry

As chatbots become more intelligent, they will usher in new standards in efficiency and customer satisfaction for the insurance industry.
By: | April 23, 2018 • 5 min read

As insurers tap artificial intelligence to analyze risk and validate claims, they’re also deploying more of that technology in customer-facing applications. Chatbots, algorithms that enable intelligent conversations with humans via text or voice, are now being used to assist both customers and agents in many areas.

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Chatbots can enable new efficiencies by assisting thousands of queries simultaneously, and as new technologies make bots more intelligent, they’re bound to offer more applications in the insurance industry in the coming years. Yet while chatbots can offer many benefits, insurers must also ensure they’re being supported with the right intelligence.

Enabling “Human-like” Conversations

A chatbot is simply an algorithm that can create a natural conversation with a human to answer questions and provide information, said Sharad Sachdev, managing director and analytics lead in Accenture’s Insurance Strategy Practice.

While insurers have been using IVR (Interactive Voice Response) at call centers since the ’90s, a convergence of new technologies are enabling far more complex conversations. Chatbots are increasingly being used in the insurance industry to support agents, and in customer-facing applications such as onboarding new clients and processing claims, said Sachdev.

Sharad Sachdev, managing director, Accenture

“Pretty much every insurance company is coming up with some version of a virtual assistant for claims or applications. And everyone is naming their bot something, it’s the new trend,” Sachdev said.

As these chatbots grow more sophisticated, companies and consumers are becoming more comfortable using them.

A survey by SnatchBot of 6,000 consumers found that more than 80 percent of users were satisfied with a chatbot experience. Researchers also say such messaging is growing as a medium for communications between corporations and consumers.

On the customer-facing end, one of the biggest advantages of a chatbot is that they are available 24 hours a day and don’t require human intervention. They can also “speak” with thousands of users and answer thousands of questions at the same time, improving the efficiency of communications.

In a complex environment like the insurance industry, there are a number of opportunities from a policy and claims standpoint to implement chatbots, said Alex Sun, President and CEO of Mitchell International.

“They are being used to give quotes on policies, provide account and billing information, and in the case of some insurtechs, process simple claims,” Sun said.

Complex Conversations with Customers and Agents

Chatbots are already being adopted by most big insurers. Allstate launched its virtual assistant ABIe (Allstate Business Insurance Expert) in 2015 to more efficiently answer questions from its 12,000 agents.

Mike Barton, division President of Allstate Business Insurance said at the time that ABIe was the company’s “precursor to cognitive computing on a shoestring.” The avatar-driven interface takes a rigid approach to understanding words and phrases and can accurately respond to questions in seconds.

Last year, GEICO launched “Kate,” a smartphone app that can communicate with customers through voice recognition and text. Kate is available around the clock to policyholders and enables a high level of self-service that can help with policy needs.

Pete Meoli, GEICO mobile and digital experience director, said that the technology has altered the way consumers interact with mobile devices.

GEICO’s chatbot virtual assistant has been programmed to communicate with policy holders on a deep level and in a natural tone. “We wanted her to be friendly with a natural interaction. She is always learning from our customers and will be an integral part of enhancing their experiences with GEICO,” Meoli said.

Many startups are also bringing new chatbot solutions to market. Maya, an artificial intelligence bot created by Lemonade, can accept applications, secure a policy for consumers in as little as 90 seconds and process claims in only three minutes.

Sriram Chakravarthy, Chief Technology Officer and co-founder of Avaamo, said conversational bots represent the “last-mile automation” for customer service.

“We believe to truly deliver the promise of conversational AI, fundamentally new technology has to be built to perform multi-turn conversations and execute judgement intensive tasks just like humans.” — Sriram Chakravarthy, Chief Technology Officer and co-founder, Avaamo

“We believe to truly deliver the promise of conversational AI, fundamentally new technology has to be built to perform multi-turn conversations and execute judgement intensive tasks just like humans,” Chakravarthy said.

Avaamo currently has more than two dozen customers in the insurance industry who are using conversational bots for various use-cases ranging from customer service to internal helpdesk. Bots are also being adopted for underwriting assistance, agent advisory services and for on-boarding assistance for HR teams.

Chatbot Success Hinges on Underlying Intelligence

While chatbots hold great promise for the industry, they are not without challenges. Poorly-designed bots that malfunction or don’t meet customers’ expectations can backfire and result in brand damage.

Insurers are advised to thoroughly test their bots before deploying and to track bot activity and incorporate feedback loops with customers. Insurers must also ensure their chatbots are compliant with regulatory requirements and have a high level of data protection, Chakravarthy said.

Despite the advances in pronunciation, listening skills and comprehension, accuracy can still be a problem with some bots, Chakravarthy said.

One best practice is to design the bot from the ground up to meet the end goals the insurer is seeking to accomplish. “The intent of the bot is not to be the next Siri or Alexa but to be specific to the domain and help solve customer challenges,” Chakravarthy said.

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It’s worth noting that the more intelligent they try to make the chatbot, the “more risky it is,” Sachdev said. Many of Accenture’s clients are starting chatbot deployments with more simple conversations then moving to more complex ones once they have refined the technology.

The most successful chatbots are built not just on the natural language layer, but a high level of intelligence underneath to field questions and find information. Chatbots that force users to “spoon feed” information don’t perform well, Sachdev said.

Despite the advances and the more “human-like” conversational abilities of these algorithms, customers don’t want long conversations with automated applications.

“Machines will never have that level of emotionality in their response. The last thing you want is a 300-word response from a machine. You start with simpler situations,” Sachdev said.

Finally, insurers shouldn’t force consumers into using chatbots, and they should only be used as one optional means of communication in conjunction with mobile apps, websites or human agents.

“Every customer behaves differently, this should be one of the channels being offered and the customer should decide which is best for them,” Sachdev said. &

Craig Guillot is a writer and photographer, based in New Orleans. He can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

Insurtech

Kiss Your Annual Renewal Goodbye; On-Demand Insurance Challenges the Traditional Policy

Gig workers' unique insurance needs drive delivery of on-demand coverage.
By: | September 14, 2018 • 6 min read

The gig economy is growing. Nearly six million Americans, or 3.8 percent of the U.S. workforce, now have “contingent” work arrangements, with a further 10.6 million in categories such as independent contractors, on-call workers or temporary help agency staff and for-contract firms, often with well-known names such as Uber, Lyft and Airbnb.

Scott Walchek, founding chairman and CEO, Trōv

The number of Americans owning a drone is also increasing — one recent survey suggested as much as one in 12 of the population — sparking vigorous debate on how regulation should apply to where and when the devices operate.

Add to this other 21st century societal changes, such as consumers’ appetite for other electronic gadgets and the advent of autonomous vehicles. It’s clear that the cover offered by the annually renewable traditional insurance policy is often not fit for purpose. Helped by the sophistication of insurance technology, the response has been an expanding range of ‘on-demand’ covers.

The term ‘on-demand’ is open to various interpretations. For Scott Walchek, founding chairman and CEO of pioneering on-demand insurance platform Trōv, it’s about “giving people agency over the items they own and enabling them to turn on insurance cover whenever they want for whatever they want — often for just a single item.”

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“On-demand represents a whole new behavior and attitude towards insurance, which for years has very much been a case of ‘get it and forget it,’ ” said Walchek.

Trōv’s mobile app enables users to insure just a single item, such as a laptop, whenever they wish and to also select the period of cover required. When ready to buy insurance, they then snap a picture of the sales receipt or product code of the item they want covered.

Welcoming Trōv: A New On-Demand Arrival

While Walchek, who set up Trōv in 2012, stressed it’s a technology company and not an insurance company, it has attracted industry giants such as AXA and Munich Re as partners. Trōv began the U.S. roll-out of its on-demand personal property products this summer by launching in Arizona, having already established itself in Australia and the United Kingdom.

“Australia and the UK were great testing grounds, thanks to their single regulatory authorities,” said Walchek. “Trōv is already approved in 45 states, and we expect to complete the process in all by November.

“On-demand products have a particular appeal to millennials who love the idea of having control via their smart devices and have embraced the concept of an unbundling of experiences: 75 percent of our users are in the 18 to 35 age group.” – Scott Walchek, founding chairman and CEO, Trōv

“On-demand products have a particular appeal to millennials who love the idea of having control via their smart devices and have embraced the concept of an unbundling of experiences: 75 percent of our users are in the 18 to 35 age group,” he added.

“But a mass of tectonic societal shifts is also impacting older generations — on-demand cover fits the new ways in which they work, particularly the ‘untethered’ who aren’t always in the same workplace or using the same device. So we see on-demand going into societal lifestyle changes.”

Wooing Baby Boomers

In addition to its backing for Trōv, across the Atlantic, AXA has partnered with Insurtech start-up By Miles, launching a pay-as-you-go car insurance policy in the UK. The product is promoted as low-cost car insurance for drivers who travel no more than 140 miles per week, or 7,000 miles annually.

“Due to the growing need for these products, companies such as Marmalade — cover for learner drivers — and Cuvva — cover for part-time drivers — have also increased in popularity, and we expect to see more enter the market in the near future,” said AXA UK’s head of telematics, Katy Simpson.

Simpson confirmed that the new products’ initial appeal is to younger motorists, who are more regular users of new technology, while older drivers are warier about sharing too much personal information. However, she expects this to change as on-demand products become more prevalent.

“Looking at mileage-based insurance, such as By Miles specifically, it’s actually older generations who are most likely to save money, as the use of their vehicles tends to decline. Our job is therefore to not only create more customer-centric products but also highlight their benefits to everyone.”

Another Insurtech ready to partner with long-established names is New York-based Slice Labs, which in the UK is working with Legal & General to enter the homeshare insurance market, recently announcing that XL Catlin will use its insurance cloud services platform to create the world’s first on-demand cyber insurance solution.

“For our cyber product, we were looking for a partner on the fintech side, which dovetailed perfectly with what Slice was trying to do,” said John Coletti, head of XL Catlin’s cyber insurance team.

“The premise of selling cyber insurance to small businesses needs a platform such as that provided by Slice — we can get to customers in a discrete, seamless manner, and the partnership offers potential to open up other products.”

Slice Labs’ CEO Tim Attia added: “You can roll up on-demand cover in many different areas, ranging from contract workers to vacation rentals.

“The next leap forward will be provided by the new economy, which will create a range of new risks for on-demand insurance to respond to. McKinsey forecasts that by 2025, ecosystems will account for 30 percent of global premium revenue.

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“When you’re a start-up, you can innovate and question long-held assumptions, but you don’t have the scale that an insurer can provide,” said Attia. “Our platform works well in getting new products out to the market and is scalable.”

Slice Labs is now reviewing the emerging markets, which aren’t hampered by “old, outdated infrastructures,” and plans to test the water via a hackathon in southeast Asia.

Collaboration Vs Competition

Insurtech-insurer collaborations suggest that the industry noted the banking sector’s experience, which names the tech disruptors before deciding partnerships, made greater sense commercially.

“It’s an interesting correlation,” said Slice’s managing director for marketing, Emily Kosick.

“I believe the trend worth calling out is that the window for insurers to innovate is much shorter, thanks to the banking sector’s efforts to offer omni-channel banking, incorporating mobile devices and, more recently, intelligent assistants like Alexa for personal banking.

“Banks have bought into the value of these technology partnerships but had the benefit of consumer expectations changing slowly with them. This compares to insurers who are in an ever-increasing on-demand world where the risk is high for laggards to be left behind.”

As with fintechs in banking, Insurtechs initially focused on the retail segment, with 75 percent of business in personal lines and the remainder in the commercial segment.

“Banks have bought into the value of these technology partnerships but had the benefit of consumer expectations changing slowly with them. This compares to insurers who are in an ever-increasing on-demand world where the risk is high for laggards to be left behind.” — Emily Kosick, managing director, marketing, Slice

Those proportions may be set to change, with innovations such as digital commercial insurance brokerage Embroker’s recent launch of the first digital D&O liability insurance policy, designed for venture capital-backed tech start-ups and reinsured by Munich Re.

Embroker said coverage that formerly took weeks to obtain is now available instantly.

“We focus on three main issues in developing new digital business — what is the customer’s pain point, what is the expense ratio and does it lend itself to algorithmic underwriting?” said CEO Matt Miller. “Workers’ compensation is another obvious class of insurance that can benefit from this approach.”

Jason Griswold, co-founder and chief operating officer of Insurtech REIN, highlighted further opportunities: “I’d add a third category to personal and business lines and that’s business-to-business-to-consumer. It’s there we see the biggest opportunities for partnering with major ecosystems generating large numbers of insureds and also big volumes of data.”

For now, insurers are accommodating Insurtech disruption. Will that change?

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“Insurtechs have focused on products that regulators can understand easily and for which there is clear existing legislation, with consumer protection and insurer solvency the two issues of paramount importance,” noted Shawn Hanson, litigation partner at law firm Akin Gump.

“In time, we could see the disruptors partner with reinsurers rather than primary carriers. Another possibility is the likes of Amazon, Alphabet, Facebook and Apple, with their massive balance sheets, deciding to link up with a reinsurer,” he said.

“You can imagine one of them finding a good Insurtech and buying it, much as Amazon’s purchase of Whole Foods gave it entry into the retail sector.” &

Graham Buck is a UK-based writer and has contributed to Risk & Insurance® since 1998. He can be reached at riskletters.com.